Op-Ed: Supreme Court Decision May Alter Land-Use Decisions for Years

Lost in the hubbub about higher-profile cases, one decision by the U.S. Supreme Court could give local communities a cause for concern.

The U.S. Supreme Court concluded its term with several blockbuster decisions on marriage equality, affirmative action, and voting rights. But one decision went largely unnoticed beneath the headlines of the other decisions, one with the potential to impact land-use decisions by state and local governments for years to come.

In the case of Koontz v. St. Johns River Water Management District, decided June 25, 2013, a 5-4 divided Court in a decision authored by New Jersey native Associate Justice Samuel Alito, reversed a Florida state Supreme Court decision that had denied an application for development unless the property owner agreed to certain conditions. The property owner felt that the conditions were excessive in relation to the degree of environmental harm the potential development would create.

The decision was grounded in the important Nollan (1987) and Dolan (1994) Supreme Court decisions that dealt with the “Takings Clause” under the Fifth Amendment. The Takings Clause under the Fifth Amendment requires the government to pay “just compensation” to property owners whose property has been taken for public use.

The Nollan and Dolan decisions established that the approval of a land-use permit could not be conditioned upon the property owner’s relinquishment of a portion of his/her property unless there is both a “nexus” and “rough proportionality” between the government’s demand and the effects of the proposed land use. Associate Justice Alito connected the Nollan/Dolan doctrine of nexus and rough proportionality with the doctrine of “unconstitutional conditions.”

The unconstitutional conditions doctrine prevents the government from coercing people to give up constitutional rights. Associate Justice Alito recognized that in the context of land-use permitting, applicants are especially vulnerable to coercion because of the inherent costs in the land-use permitting process.

In everyday parlance, if it’s cheaper just to give in to the government’s demand than to fight it for years, then give in.

There are two important holdings in the Koontz decision. The first is that merely because nothing was taken -- that is, no land was taken by the government -- the government’s actions are still subject to examination under the Takings clause. The second is that the decision is not based upon a “regulatory” taking, but rather was found to be a “per se” taking.

Both those statements by the Alito majority should give property owners and developers hope and state and local governments pause for concern.

Most of the actions by government in regulating land use and development have been challenged by applicants and property owners as “regulatory takings” -- in other words, the actions by the government have been so intrusive and costly that the administrative or regulatory actions have significantly diminished the value of the property as to constitute a taking without just compensation.

Associate Justice Alito wrote that the Koontz claim rested upon the limited proposition that when the government commands the relinquishment of funds linked to a specific, identifiable property interest, a “per se” takings approach is the proper mode of analysis. This is potentially very significant because developers and property owners have rarely been successful in regulatory-takings challenges.

The other important statement in the majority opinion is that extortionate demands for property in the land-use permitting context run afoul of the Takings Clause not because they take property, but because they impermissibly burden the right not to have property taken without just compensation.

Because of the procedural posture of the Koontz case, the U.S. Supreme Court did not get to the proper remedy for the property owner, but remanded the case back to Florida.

But if nothing else, the Koontz decision should serve to level the negotiating playing field between an applicant and the state and local government approving authorities.

Peter S. Reinhart, Esq., is the director of the Kislak Real Estate Institute at Monmouth University and is a member of counsel with Giordano, Halleran & Ciesla. He also sits on the board of directors of NJ Spotlight.